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YEAR CALIFORNIA FORM

1997 Enhanced Oil Recovery Credit 3546


Attach to your California tax return.
Name(s) as shown on return Social security or California corporation number

FEIN

Part I Credit Computation


1 Qualified enhanced oil recovery costs. See instructions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2 Current year credit. Multiply line 1 by 5% (.05) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3 Pass-through enhanced oil recovery credit(s) from Schedule K-1 (100S, 541, 565 or 568). See instructions . . . . . . . . . . . . 3
4 Total current year enhanced oil recovery credit. Add line 2 and line 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
5 Credit carryover from prior year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
6 Total available enhanced oil recovery credit. Add line 4 and line 5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
7 Enter the amount of credit claimed on the current year tax return . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ❚ 7
Caution: This amount may be less than the amount on line 6 if your credit is limited by tentative minimum tax (TMT)
or your tax liability. See the instructions for line 7.
8 Credit carryover available for future years. Subtract line 7 from line 6 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Part II Credit Carryover
15 Year Carryover Period (See specific line instructions).
(a) Year (b) Credit generated (c) Prior year carryover (d) Amount used (e) Credit carryover
in the current year amount in 1997 to future years

1 1996

2 1997

3 Total

General Information B Description • Taxpayers who are retailers of oil or


natural gas that directly (or through a
California allows an enhanced oil recovery The California enhanced oil recovery credit is related person) sell oil or natural gas,
credit which is similar to the federal enhanced available for taxable or income years begin- excluding bulk sales of aviation fuels to
oil recovery credit under Internal Revenue ning on or after January 1, 1996. The tenta- the Department of Defense. (See IRC
Code (IRC) Section 43, with exceptions. tive enhanced oil recovery credit is equal to Section 613A(d)(2) through Sec-
Unless specifically identified otherwise, refer- 5% (representing 1/3 of the federal enhanced tion 613A(d)(3) for more information).
ences in these instructions are to the IRC as oil recovery credit) of the qualified enhanced • Taxpayers (or related persons) who are
of January 1, 1997, and to the California Rev- oil recovery costs for qualified oil recovery refiners of crude oil and, on any day
enue and Taxation Code (R&TC). projects located within California. (See Gen- during the taxable or income year,
eral Information F for further limitations on the whose daily refinery output
A Purpose enhanced oil recovery credit). exceeded 50,000 barrels.
Use form FTB 3546 to figure and claim the 3. The California credit may be carried over
C California and Federal for 15 years. The federal credit is part of
enhanced oil recovery credit for enhanced oil
recovery projects located within California. Differences the general business credit subject to the
Also use this form to claim pass-through The federal enhanced oil recovery credit limitations imposed by IRC Section 38.
enhanced oil recovery credits received from under IRC Section 43 and the California
S corporations, estates or trusts, partnerships enhanced oil recovery credit under R&TC D Definitions
or limited liability companies (LLCs) taxed as Sections 17052.8 and 23604 are generally the Qualified enhanced oil recovery costs
partnerships. same, except that: means:
S corporations, estates or trusts, 1. The California credit is equal to 5% of the 1. Any amount paid or incurred during the
*3546971*

partnerships and LLCs taxed as qualified enhanced oil recovery costs for taxable or income year for tangible prop-
partnerships should complete qualified oil recovery projects located erty located within California:
form FTB 3546 to figure the within California, as opposed to the fed- • That is an integral part of a qualified
amount of credit to pass through eral credit which is equal to 15% of the enhanced oil recovery project in
to shareholders, beneficiaries, qualified enhanced oil recovery costs for California, and
partners or members. Attach this qualified oil recovery projects located • For which depreciation (or amortization)
form to Form 100S, Form 541, within the United States, including the sea- is allowable.
Form 565 or Form 568. Show bed and subsoil adjacent to the territorial 2. Any intangible drilling and development
the pass-through credit for each waters of the United States as defined costs:
shareholder, beneficiary, partner under IRC Section 638(1). • That are paid or incurred in connection
or member on Schedule K-1 2. California does not allow the enhanced oil with a qualified enhanced oil recovery
(100S, 541, 565 or 568). recovery credit for the following taxpayers: project located within California, and

FTB 3546 1997 Side 1


• For which the taxpayer may make an Reduced credit. The credit is reduced when Specific Line Instructions
election to capitalize and amortize such the reference price, determined under IRC
costs under IRC Section 263(c)/R&TC Section 29(d)(2)(C), exceeds $28 per barrel.
Sections 17201 and 24423. The $28 value is adjusted for inflation for Part I — Credit Computation
3. Any qualified tertiary injectant expenses years after 1991. If the reference price Line 1 – Enter the total qualified enhanced oil
paid or incurred in connection with a quali- exceeds the base value of $28 (as adjusted recovery costs paid or incurred during the tax-
fied enhanced oil recovery project located by inflation) by more than $6, the credit is able or income year beginning on or after
within California. Note: For California Per- zero. For 1997, there is no reduction of the January 1, 1997, for qualified enhanced oil
sonal Income Tax Law and Bank and Cor- credit. recovery projects located within California.
poration Tax Law purposes, tertiary Other limitations. Line 3 – If you received more than one pass-
injectant costs must be capitalized and • In the case where an item of property through credit from S corporations, estates or
deducted through depreciation because qualifies the taxpayer to take the trusts, partnerships or LLCs taxed as partner-
California has not conformed to the provi- enhanced oil recovery credit as well as ships, add them and enter the total on line 3.
sions of IRC Section 193. any other California credit (such as the Attach a schedule showing the names and
Qualified enhanced oil recovery project manufacturers’ investment credit), the tax- identification numbers of the entities from
means any project located within California payer must make an election on the origi- which the credit(s) were passed through to
involving the application of one or more terti- nal return for each year stating which one you.
ary recovery methods defined in IRC Sec- credit is being claimed. Such an election Line 7 – The amount of this credit you can
tion 193(b)(3), and mentioned below, that can cannot be revoked except with the written claim on your tax return may be limited fur-
reasonably be expected to result in more than consent of the Franchise Tax Board. ther. Refer to the credit instructions in your
an insignificant increase in the amount of • S corporations may claim only 1/3 of the tax booklet for more information. These
crude oil recovery. credit against the 1.5% entity-level tax instructions also explain how to claim this
Tertiary recovery methods qualifying for the (3.5% for financial S corporations). In addi- credit on your tax return. You must use credit
credit include miscible fluid displacement, tion, S corporations may pass through code number 203 to claim this credit. Also
steam drive injection, microemulsion flooding, 100% of the credit to their shareholders. see General Information F, Limitations.
in situ combustion, polymer-augmented water • This credit cannot reduce the minimum
flooding, cyclic-steam injection, alkaline (or franchise tax (corporations, limited partner- Part II — Credit Carryover
caustic) flooding, carbonated water flooding, ships, limited liability partnerships, LLCs Line 1, column (c) – If you have a credit car-
immiscible nonhydrocarbon gas displacement, and S corporations), the alternative mini- ryover from 1996, enter the amount from your
or any other method approved by the Secre- mum tax (corporations, individuals and 1996 form FTB 3546, Part I, line 6.
tary of the Treasury. fiduciaries), the built-in gains tax
(S corporations) or the excess net passive Line 1, column (e) – Subtract the amount on
income tax (S corporations). This credit Part II, line 1, column (d) from the amount on
E Basis Part II, line 1, column (c). Enter the result on
cannot reduce regular tax below TMT. See
If any of the allowable credit is due to capital- Schedule P (100, 540, 540NR or 541) for Part II, line 1, column (e).
ized enhanced oil recovery costs, the basis of more information. Line 2, column (b) – Enter the amount from
the property must be reduced by the amount • This credit is taken in lieu of any deduction Part I, line 4.
of the credit attributable to that property. Such otherwise allowable for the same costs.
a basis adjustment must be made for the tax- Line 2, column (e) – Subtract the amount on
Therefore, any deduction allowed for the Part II, line 2, column (d) from the amount on
able or income year in which the credit is same costs must be reduced by the
allowed. Part II, line 2, column (b). Enter the result on
amount of credit claimed for the current Part II, line 2, column (e).
taxable or income year (the amount shown
F Limitations on line 7).
Line 3, column (d) – Add the amount on Part
II, line 1, column (d) to the amount on Part II,
Federal election. If a taxpayer has no federal • This credit is not refundable. line 2, column (d). Enter the result on Part II,
enhanced oil recovery credit due to making an
line 3, column (d). Note: The amount on Part
election for an item of property under IRC G Carryover II, line 3, column (d) should equal the amount
Section 43(e), which is an election not to If the available credit exceeds the current year
apply IRC Section 43 for federal tax purposes, on Part I, line 7.
tax, the unused credit may be carried over to
the election is binding and irrevocable for Cali- Line 3, column (e) – Add the amount on Part
succeeding years. The maximum carryover
fornia purposes and the California enhanced II, line 1, column (e) to the amount on Part II,
period is fifteen years. Apply the carryover to
oil recovery credit with respect to that item of line 2, column (e). Enter the result on Part II,
the earliest taxable or income year(s) possi-
property is zero. line 3, column (e). Note: The amount on Part
ble. In no event can the credit be carried back
Ineligible taxpayers. Taxpayers that are not II, line 3, column (e) should equal the amount
and applied against a prior year’s tax.
permitted to compute their depletion allow- on Part I, line 8.
ance under IRC Section 613 because they
are retailers of oil or natural gas, certain
related parties and certain refiners of crude oil
cannot claim the California enhanced oil
recovery credit. See IRC Section 613A(d)(2)
through Section 613A(d)(4) for more informa-
tion on ineligible taxpayers.

Side 2 FTB 3546 1997